Luxury retailer Saks Fifth Avenue’s fast-growing e-commerce business aims to go public soon at roughly triple the valuation it was set earlier this year, a sign of booming online sales of department stores.
Saks is questioning potential underwriters this week for a first public offering that could take place in the first half of 2022 and is targeting a valuation of around $ 6 billion, people familiar with the matter said. It was last valued at $ 2 billion in March.
Meeting with bankers is usually one of the first steps towards a listing, although there is no guarantee that Saks will go ahead with one or receive such an assessment. Market conditions and other unpredictable factors strongly influence IPO plans.
An IPO would be the second phase of a deal struck earlier this year that separated e-commerce activity from Saks’ slower-growing brick-and-mortar retail operations. This move, intended to fuel the growth of the digital unit, prompted an activist investor to call on Macy’s Inc.
do the same last week.
Saks’ parent company, HBC, was shut down in early 2020 by a group of investors, including its chairman, in a deal that valued the entire company at around $ 1.5 billion. In March, she split the famous luxury brand’s e-commerce business into a separate entity and sold a minority stake to venture capital firm Insight Partners for a valuation of $ 2 billion. The online unit at the time had annual sales of around $ 1 billion.
The IPO plan highlights the rekindled fortunes Saks is enjoying, thanks to soaring online sales. The company said the online unit’s gross merchandise value, a measure of sales, increased 82% between the second quarter of 2019 and the same period this year.
Prior to the privatization deal, HBC, like other traditional retailers, struggled to adjust to customers doing more online shopping and new competition from web-based brands. He was also under pressure from an activist investor who argued that the value of the company’s real estate exceeded its market value.
But Covid-19 sparked a surge in online sales at Saks Fifth Avenue and other department stores as customers shopped at home in the early months of the pandemic, establishing habits they have stuck with even. whether vaccines make it safer to return to normal routines.
This has bolstered a major push from retailers like Walmart Inc.
to link e-commerce platforms more closely to stores. Amazon.com Inc.
plans to open several large retail stores that will function as department stores, as part of an effort to expand its clothing and housewares sales.
Saks Fifth Avenue has taken a somewhat different path. The purely financial separation provides the company with additional capital to invest in the digital unit. From a customer perspective, not much has changed: The Saks brand remains both in stores and on the website, and shoppers can shop online and make in-store returns as usual. Behind the scenes, the online business oversees marketing and merchandising for both channels, and stores receive an affiliate fee in recognition of online sales and other benefits that a physical presence can generate.
Online upstarts valuations have also skyrocketed. Farfetch Ltd.
has a market value of around $ 14 billion. Last year, the Neiman Marcus Group split from MyTheresa Group GmbH to resolve a dispute with the bondholders. The online luxury seller went public in January 2021 and was valued at over $ 2 billion.
Activist investor Jana Partners LLC has a stake in Macy’s, which owns rival Saks Bloomingdale’s, and sent a letter to the retailer on Wednesday asking it to explore an ecommerce separation, the Wall Street Journal reported. It is not known how Macy’s will react.
Macy’s online unit has annual sales of approximately $ 8 billion. Jana believes a standalone e-commerce business would be worth a multiple of Macy’s current market value, which stood at around $ 7.4 billion on Friday after shares rose nearly 7% in the wake of the report from Journal.
Write to Cara Lombardo at [email protected]
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